How Joe Hockey ended the age of entitlement

Peter Hartcher

As Joe Hockey set about deciding how to cut welfare payments, he asked for a comprehensive list of all entitlement programs. He couldn’t find one.

Each department, each level of government, knew its own programs. But his public service advisers told the Treasurer that there was no complete document that included all federally funded payments, concessions and programs supplied through all three levels of government.

So the Treasury set up a team of four officials to pull together a full list, according to officials familiar with the exercise.

They spent weeks ferreting out every entitlement for the Treasurer, who had promised to bring an end to the “Age of Entitlement”.

Hockey wanted them to be so determined that he nicknamed them the “Team of Arseholes”, although he sometimes moderated this to the “Team of Bastards” in more polite company.

They rewarded him by finding that while age pensioners, for instance, can receive the pension as a direct payment, they could also be eligible for 23 other supplements and concessions, depending on their situation.

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And a further 26 types of services, training or loans, although many were not specifically for pensioners, the team told Hockey.

Likewise, students in training might be eligible for one of four types of direct payments from the government, plus another 23 supplements and concessions although, again, not all were designed exclusively for students.

Students might also be able to make use of a further 21 categories of services, training and loans, according to the team’s findings. Every one of these was conceived over the decades for good reason – because it served a need.

Yet Hockey had decided that Australia had developed a syndrome of expectation and dependency that strained its budget and sapped its energy.

In the traditional Treasurer’s post-budget address to the National Press Club, Hockey said: “At the end of the day what brings a budget together is not just the information that is provided to us but the values that we bring to the table.”

So what values were they?

Some of the budget cuts were so harsh that even the Business Council of Australia, the lobby group for the biggest of big businesses, was moved to protest: “We are very concerned about the risk that savings are falling too heavily on some families and young people trying to find work,” said its chief executive, Jennifer Westacott.

What moved the government to such harshness? Is the entire government, in fact, what Hockey labelled his crack welfare ferrets, a Team of Bastards, or worse?

The budget gives Australia the clearest view yet of the character of Tony Abbott and his cabinet. It also gives the country insights into Bill Shorten and the kind of opposition he wants to lead, as well as the Greens and the new wildcard in Australian politics, Clive Palmer. First, the government.

The fiscal task confronting the government was to cut the deficit in a purposeful but gradual way. It had to be purposeful not because Australia is in a budget emergency, because it certainly is not. But it was on the way to one.

The federal government today collects revenues equivalent to 23 per cent of Australia’s GDP. It spends the equivalent of 26 per cent. The simple reality is that the annual shortfall is 3 per cent of GDP.

If that is allowed to persist, there is only one possible outcome. Corrective action was needed. It was not fiscally urgent, but it was politically urgent. Why?

The lesson of history is that the only time that a government will impose real discipline is in its first budget. Or, as the US and some European nations have just shown, in a dire crisis. The economists who’ve been reassuring the media that there is no urgency in Australia fail to grasp this reality. Best not get to the point of dire crisis.

The government set its budget repair at a sensible rate. After taking account of the one-off top-up of the Reserve Bank balance sheet, the first Abbott budget is calculated to cut the deficit by 0.8 per cent of GDP in the first year and a similar amount in the second before easing off. This will bring the deficit in check but won’t appreciably harm growth.

It’s at this point, within those fiscal guiderails, that the government’s values come into play. How should it impose those cuts?

First, it discarded the many election promises that would have tied its hands in making dramatic change. Abbott decided it was more important to be purposeful than truthful.

After dispensing with its promises so lightly, the government then set about applying, according to Hockey, “the values of enterprise, of hard work, of self-reliance, of control of your destiny, and the fact that we’ve got to move away from the culture of entitlement in some areas to a culture of opportunity and hope”.

These were the declared values, but there were also the grudges and frustrations. The deputy prime minister and leader of the National Party, Warren Truss, said this about age pensioners in a post-budget speech to Brisbane’s Conservative Club: “Increasingly the lifestyle - and the savings for superannuation - are being seen as the opportunity to enjoy a few cruises and the luxuries of life for a few years until it runs out and then people wish to fall back on the aged pension.”

The minister for social services, Kevin Andrews, told a press conference on Monday: “The days of easy welfare for young people is over. We want a fair system, but we don’t think it’s fair that young people can just sit on the couch at home and pick up a welfare cheque.”

And some of the frustration in the Coalition was frustration with their former leader and Liberal hero John Howard. A government strategist told me: “It’s horseshit that a family earning $170,000 with three kids still gets government support.”

That’s a reference to the system of family payments that was one of John Howard’s proudest legacies.

All of these areas – pensions, unemployment benefits for people under 30 and family payments – were among those targeted by this week’s budget.

We have now learned, very starkly, that even some of the Liberals who know Abbott closely were quite wrong about his values.

His former cabinet colleague, Peter Costello, wrote a column in this newspaper in 2011 to issue a warning to the Liberals: Abbott didn’t share the core beliefs of the party mainstream, the party of Howard and Costello.

He pointed out that Abbott had “worked closely with the DLP in his student days”, a reference to the old Democratic Labor Party of BA Santamaria.

“The DLP was good on defence and the Cold War but it was not up to much on economic issues,” Costello wrote. He said that the senator recently elected under the resurrected banner of the DLP, John Madigan, should be left to “run the case for protection and regulation”.

“That is not the future for the Coalition. Its leaders are there to promote and implement Liberal policies like freedom in the workplace, open trade, lower tax, and careful spending of taxpayers' money.”

The evidence now before us is exactly the opposite. The Abbott-Hockey government is revealed to be a more ideologically conservative outfit than Howard-Costello.

The budget conducts a frontal attack on three Howard legacies. One is the family payment system. It will remain as a support, but the government proposes to strip out elements that it considers to be “middle-class welfare.” Howard was moved to publicly mourn the program.

Second is the Howard urge to centralise power in the federal government at the expense of the States. Abbott and Hockey are proposing the exact opposite, to devolve power to the States.

“We’ve been infantilising the States for the last 30 years,” says a government strategist. Now they have to grow up, says the government, with a proposed $80 billion less than Labor had promised for their hospital and schools over the next decade.

Third is the Howard boondoggle known as the ethanol production subsidy. It’s gone.

The Abbott-Hockey government is also more pro-market and pro-deregulation. The Howard-Costello government never proposed the deregulation of university fees. It never proposed a co-payment to visit a doctor.

But the Abbott-Hockey program isn’t all about shrinking the state. They’re also introducing three programs to give weight to their rhetoric of opportunity.

The biggest is the decision to give federal subsidies not only to university degrees but to all higher education courses. Second is to grant $20,000 concessional loans for trades training. Third is the “Restart” plan to pay a $10,000 incentive to companies to hire older workers.

Abbott’s plan would begin to repair the budget; it would also make Australia a more unequal society. The cuts to welfare are permanent. The 2 per cent tax levy on the rich is temporary.

Bill Shorten’s budget response is also revealing. He is modelling himself as opposition leader not on Labor leaders Bob Hawke or Kevin Rudd but on Tony Abbott. His budget reply was all snarls, no solutions.

The Greens’ positions confirm what we already know about them. They are more interested in obstructionism than outcomes. Just as the party of climate action opposed a Labor government’s emissions trading scheme, the party of wealth redistribution is opposed to the Liberals’ tax levy on the rich.

And Clive Palmer party? He’s talking mumbo jumbo and shaping as a classic populist opportunist. He’s committed to blocking the Medicare copayment, but he remains a wildcard. Some of Abbott’s most dramatic proposals for Medicare, universities, welfare and health and education depend on him. We have not yet seen how he will conduct his party in Senate negotiations.

And, like Shorten and the Greens, Palmer remains in blithe denial that there is any need to start addressing Australia’s deficit. Bastards all, I hear Don Chipp’s ghost cry.